Control Number : Item Number : 262. Addendum StartPage: 0

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Control Number : 42511

Item Number : 262

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PROJECT NO. 42511

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COMPLAINT OF CALPINE § PUBLIC UTILITY CO^P"'I 2, 33^' A"&

CORPORATION AND NRG ENERGY, §

INC. AGAINST THE ELECTRIC

RELIABILITY COUNCIL OF TEXAS § OF TEXAS

AND APPEAL OF DECISION §

CONCERNING THE HOUSTON §

IMPORT PROJECT §

JOINT REPLY TO COMPLAINANTS' MOTION FOR REHEARING

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TABLE OF CONTENTS

1. INTRODUCTION ... 1 II. REPLY TO COMPLAINANTS' ASSERTIONS OF ERROR ... 2

A. The Commission's Order is reasonable and supported by the record evidence; the Complainants failed to meet their burden to identify any violation of any applicable planning requirement . ... 3 B. The Commission properly excluded portions of the Complainants' direct and rebuttal

testimony because the testimony addressed policy issues beyond the narrow scope of this case ... 5 C. The Commission's Order complied with APA § 2001.141. (Point of Error No. 14, citing

to Finding of Fact 51 and Conclusion of Law 5) ... 6 III. CONCLUSION ... ... 8

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PROJECT NO. 42511

COMPLAINT OF CALPINE §

CORPORATION AND NRG ENERGY, §

INC. AGAINST THE ELECTRIC §

RELIABILITY COUNCIL OF TEXAS §

AND APPEAL OF DECISION §

CONCERNING THE HOUSTON §

IMPORT PROJECT §

PUBLIC UTILITY COMMISSION

OF TEXAS

JOINT REPLY TO COMPLAINANTS' MOTION FOR REHEARING

CenterPoint Energy Houston Electric, LLC ("CenterPoint Energy"), Cross Texas Transmission, LLC ("Cross Texas"), the City of Garland, Luminant Generation Company LLC and Luminant Energy Company LLC ("Luminant"), and Texas Industrial Energy Consumers ("TIEC") submit this reply to Calpine Corporation ("Calpine") and NRG Energy, Inc.'s ("NRG") (collectively, "Complainants") Motion for Rehearing of Docket No. 42511. The Joint Parties received notice of the Commission's Order on December 16, 2014,1 so this Reply is timely filed under P.U.C. Proc. R. 22.264 and § 2001.146(b) of the Administrative Procedure Act (APA).2

1. INTRODUCTION

The Complainants' Motion for Rehearing should be denied. The Commission's Order, including the findings of fact and conclusions of law, does not prejudice the Complainants' substantial rights.3 Specifically, the Commission's Order: 1) does not violate any constitutional or statutory provision, 2) is not in excess of the Commission's statutory authority, 3) was not made through any unlawful procedure, 4) is not affected by any error of law, 5) is reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole, and 6) is not arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.4

The Motion for Rehearing raises no new facts or arguments that merit a different outcome. The robust record in this case conclusively demonstrates that the Commission did not err in excluding any testimony or in finding and concluding that ERCOT's process and its

1 The City of Garland received notice on December 18, 2014. 2

Tex. Gov't Code § § 2001.001 et seq. (West 2008) ("APA"). 3 APA § 2001.174(2).

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endorsement of the Houston Import Project (HIP) was in conformance with all relevant Protocols, Planning Guides, procedures, and laws the Commission has jurisdiction to administer, or any order or rule of the Commission.

The record evidence shows that Houston has long relied on importing electricity to serve customers and maintain reliability.5 Further, the evidence demonstrates that load growth in the area, including industrial development along the Houston Ship Channel and the Texas Gulf Coast, dictates that Houston will ultimately need additional import capability, particularly in light of the geographic and siting limitations for new generation in the region.6 Every single case study in evidence shows overloads on the import paths into Houston by 2018. 7 Complainants have raised no factual, legal, or other considerations that should cause the Commission to revisit its decision. The Commission should deny the Motion for Rehearing.

II. REPLY TO COMPLAINANTS' ASSERTIONS OF ERROR

The Complainants' Motion for Rehearing re-urges the same arguments the Complainants have been making since the HIP was first proposed. All of these issues have been repeatedly considered and rejected. Nothing raised by the Motion for Rehearing shows any error on ERCOT's part during the study process, nor does it undermine ERCOT's finding of need for the HIP. The Complainants' real dispute is with the outcome of the HIP study-not the study process or any specific ERCOT action. Distilled to its core, the Complainants' sole allegation has been that the assumptions ERCOT used to study the HIP were not "reasonable" or "normal .,,8 As discussed at length in post-hearing briefs,9 the evidence before the Commission in this docket shows that ERCOT's load assumptions and the variations it made to allow the study case to "solve" (i.e., for generation to meet load under the studied system stresses) were both reasonable and consistent with historical ERCOT practices. The Complainants have not presented any new evidence in this Motion for Rehearing demonstrating that ERCOT violated

5 See ERCOT Ex. 2 (Billo Dir.) at 19 and JB-1 at Bates 49 (ERCOT Independent Review of Houston

Import RPG Project at 9).

6 Id.

' id.

8

Calpine/NRG Ex. 4 (Baughman Reb.) at 6.

9 E.g., see ERCOT's Post-Hearing Brief at 14-24 (Oct. 31, 2014); Cross Texas Transmission, LLC and

City of Garland's Post-Hearing Brief at 8-11 (Oct. 31, 2014); Luminant's Post-Hearing Brief at 5-12 (Oct. 31, 2014); and TIEC's Post-Hearing Brief at 7-18 (Oct. 31, 2014).

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any relevant law as required under P.U.C. Proc. R. 22.151(b). The Motion for Rehearing should be denied.

A. The Commission's Order is reasonable and supported by the record evidence; the Complainants failed to meet their burden to identify any violation of any applicable planning requirement.

The evidence in this case overwhelmingly shows that ERCOT did not violate any rule, order, procedure, or protocol applicable to the HIP study process. The Complainants' points of error rehash arguments regarding the scope of the ERCOT Protocols and Planning Guide requirements that were repeatedly addressed during the Regional Planning Group (RPG) process and again during the course of this case. The Commission properly rejected those arguments in the Order based on the clear and extensive evidence in the docket. Complainants have brought forth no material new arguments and therefore the Commission should deny the Motion for Rehearing.

The Complainants' arguments that ERCOT's planning assumptions inappropriately drove the finding that new import capability is needed into the Houston area by 2018 are belied by the facts before the Commission. The evidence in this docket shows that, in response to the same complaints raised by Calpine and NRG during the HIP review process, ERCOT ran a number of additional sensitivity cases to make sure that no single assumption or combination of assumptions was driving the reliability findings.10 Each of these sensitivity cases identified overloads on at least one circuit starting in 2018, and verified the need for additional import capacity into Houston.il Thus, the evidence before the Commission clearly demonstrates that ERCOT made every reasonable effort to address Calpine and NRG's questions and concerns during the stakeholder process, resulting in an analysis that went beyond the requirements of the applicable protocols and Planning Guide and thus was transparent and thorough. The evidence presented by Complainants failed to satisfy their burden to show that ERCOT violated any relevant law in its original analysis or any of the sensitivity cases. Therefore, the Commission's Order should stand.

10 The Complainants' primary allegations are that the load levels ERCOT assumed in the HIP study were not "reasonable" variations of the SSWG load forecast, as permitted by Planning Guide § 4.1.1.1(5), and were not "normal" conditions under § 3.1.4.1(1). ERCOT Ex. 2 (Billo Dir.) at 17-19.

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In their Motion for Rehearing, Calpine and NRG again argue that ERCOT did not follow Planning Guide § 4.1.1.1(5), which allows ERCOT to make variations to the generation dispatch and commitment assumed in the Steady State Working Group (SSWG) Base Cases, but does not require that any such adjustments be made.12 Again, the evidence clearly shows that the variations that ERCOT made to the SSWG base case-the required starting point for the Regional Transmission Plan (RTP)-were all reasonable and consistent with Planning Guide § 4.1.1.1(5).13 The Complainants' arguments that reducing the total load from the SSWG base case to the level assumed in the HIP study was "unreasonable" or a violation of § 4.1.1.1(5) are unsupported by the evidence in this proceeding and were appropriately rejected by the Commission.

The Complainants' other arguments are similarly without basis. As the testimony in this docket demonstrates,14 the decisions made to divide the ERCOT region into two study areas,' 5 to use standard load scaling,16 and to use the "higher of' load forecastl7 are all reasonable, consistent with ERCOT's prior practice, and consistent with applicable protocols and Planning Guide provisions.

Throughout this case, the Complainants have tried to complicate the basic question before the Commission-whether ERCOT violated any law, rule, protocol, or other applicable requirement-by attempting to inject irrelevant policy considerations and recommendations for revisions to the current planning process. However, those issues were not before the Commission in this appeal. Ultimately, the Complainants failed to present evidence that any applicable requirement was violated, and the Motion for Rehearing offers no reason for the Commission to reverse its reasoned and substantiated basis for issuance of the Order. The Commission should deny the Complainants' Motion for Rehearing.

12 Planning Guide §§ 6.1 (describing the SSWG base case as a "starting point") and 4.1.1.1(5) (allowing ERCOT to make reasonable adjustments to the SSWG base case).

13 E.g., TIEC Ex. 1(Griffey Dir.) at Bates 37.

'a See ERCOT's Post-Hearing Brief at 14-24.

ls

Cross Texas and Garland's Post-Hearing Brief at 13-14. 16

CenterPoint's Post-Hearing Brief at 16-20 (Oct. 31, 2014). 17 Luminant's Post-Hearing Brief at 4-7 (Oct. 31, 2014).

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B. The Commission properly excluded portions of the Complainants' direct and rebuttal testimony because the testimony addressed policy issues beyond the narrow scope of this case.

The Administrative Law Judge's (ALJ's) decisions striking portions of the Complainants' direct and rebuttal testimony in Order Nos. 11 and 18 were correct and consistent with the appropriate scope of this case. Order No. 11 was previously appealed, and that appeal was appropriately denied by the Commission.18 Pursuant to the Commission's Preliminary Order issued July 11, 2014 and P.U.C. Proc. R. 22.251, the Commission's review in this case was limited to whether ERCOT's decision to endorse the HIP was "in violation or claimed violation of any law that the commission has jurisdiction to administer, of any order or rule of the commission, or of any protocol or procedure adopted by ERCOT pursuant to any law that the commission has jurisdiction to administer." 19 This narrow scope was emphasized by the Commissioners at the August 7, 2014 Open Meeting,20 as well as at the July 10, 2014 Open Meeting.21 As the Commissioners noted, the Complainants' issues regarding the current transmission planning process "might merit making changes on a going-forward basis,"22 but this case is not the right forum for addressing those policy decisions.23 The Commission made clear that the applicable inquiry was whether ERCOT violated any planning requirements in place at the time of the HIP study-not whether those requirements should have been different to suit the Complainants' preferences. As the Commission has repeated numerous times during the course of these proceedings, such planning policy decisions should be addressed through a "larger discussion at ERCOT"24 among the stakeholders, where all interested parties can weigh in on changes that would apply prospectively and would not impact the outcome of this proceeding. The ALJ was correct to strike testimony that addressed these prospective changes and extraneous

18 Motion for Good Cause Exception For Leave To Appeal Order No. 11 (Sept. 25, 2014); Order Denying Motion (Oct. 24, 2014).

19

Order at Finding of Fact 17; P.U.C. Proc. R. 22.251(b).

20 See Open Meeting Tr. at 23-31 (Aug. 7, 2014). 21 See Open Meeting Tr. at 59-63 (July 10, 2014).

22

Commissioner Anderson, Open Meeting Tr. at 27 (Aug. 7, 2014). 23

Commissioner Anderson, Open Meeting Tr. at 59 (July 10, 2014); see also Chairman Nelson, Open Meeting Tr. at 27 (July 10, 2014) ("I would caution the complainants here that we're... we are not taking up these issues.").

24

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policy issues through Order Nos. 11 and 18 and the Commission was correct to deny the appeal of Order No. 11. Complainants have raised no new grounds that should cause the Commission to reconsider its decision.

C. The Commission's Order complied with APA § 2001.141. (Point of Error No. 14, citing to Finding of Fact 51 and Conclusion of Law 5)

The only point of error that goes directly to an alleged legal sufficiency of the Commission's Order is Point of Error No. 14.25 As noted above, the claims made by Complainants are thoroughly refuted by the evidence of record, and included in the Order in its findings of fact and conclusions. Complainants argue that the Order fails to comply with the APA requirement that findings stated in terms of statutory requirements must be supported by underlying findings.26 This assertion is without merit.

Long-standing case law makes clear that the APA simply requires an agency to provide an aggrieved party sufficient notice of the basis of the decision and to allow a court to conduct proper judicial review.27 Point of Error No. 14 cites to Finding of Fact 51 and Conclusion of Law 5,28 both of which state:

ERCOT did not violate any law that the Commission has jurisdiction to administer, any order or rule of the Commission, or any protocol or procedure adopted by ERCOT.

APA § 2001.141(d) states "Findings of fact, if set forth in statutory language, must be accompanied by a concise and explicit statement of the underlying facts supporting the findings."

Complainants fail to demonstrate that "the Commission's failure to include specific facts or findings that would support its ultimate finding and conclusion deprives Complainant of a meaningful ability to challenge the sufficiency of the evidence the Commission believed supported its ruling."29 The Commission's Order provides numerous underlying findings that support Finding of Fact No. 51 and Conclusion of Law 5. See, for example, Findings of Fact

25

Motion for Rehearing at 22-23.

21 Id.;

APA § 2001.141(d).

27 Eg., Goeke v. Houston Lighting & Power Co., 797 S.W.2d 12, 15 (Tex. 1990).

28 Point of Error Nos. 12 and 13 also cite to Finding of Fact 51 and Conclusion of Law 5, respectively, however, those two points of errors raise substantial evidence concerns. Motion for Rehearing at 21-22.

29

Motion for Rehearing at 22-23 (emphasis added).

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Nos. 36 through 38 (Applicable Standards) and Findings of Fact 39 through 50 (ERCOT's Analysis).

A litany of cases, including Texas Supreme Court and Third Court of Appeals cases, demonstrate that APA § 2001.141(d) does not require extensive findings, but rather findings that are sufficient to provide adequate notice of the basis for the agency decision.30 In addition, the Third Court of Appeals speaks straight to Complainants' claim that it is deprived of a meaningful ability to challenge the Order:

An agency is not required to indicate which underlying facts support each ultimate finding, as long as the reviewing court can fairly and reasonably say that the underlying or basic facts support the agency's conclusion on the ultimate or statutory criteria. The findings should be sufficient to "inform the parties and the courts of the basis for the agency's decision so that the parties may intelligently prepare an appeal and so that the courts may properly exercise their function of review." The Board's findings here do this, as evidenced by the fact that both parties' briefs identified specific statements implicated by the Board's findings of fact. Furthermore, there is no precise form in which an agency must articulate its underlying findings and the reviewing court may not subject the agency's order to a "hypertechnical standard of review."31

The findings are clear and comprehensive, and sufficient to support the Commission's conclusions on the ultimate finding and conclusion. Complainants are clearly aware of the evidence the Commission believes supports its ruling, as evidenced by the Complainants' extensive briefing and Motion for Rehearing. Therefore, the statement of underlying findings, Finding of Fact 51, and Conclusion of Law 5 satisfy the requirements of the APA § 2001.141(d), and Point of Error No. 14 should be rejected.

30 For example, in Smith Motor Sales, Inc. v. Texas Motor Vehicle Comm 'n, the Court held: "A statement of underlying findings is sufficient if it serves the purposes behind the requirement that the findings be made." 809 S.W.2d 268, 271 (Tex. App.-Austin 1991, writ denied) (citing Goeke v. Houston Lighting &

Power Co., 797 S.W.2d 12, 15 (Tex. 1990)). "[The findings] should inform the parties and the courts of

the basis for the agency's decision so that the parties may intelligently prepare an appeal and so that the courts may properly exercise their function of review." Id.; see also Texas Health Facilities Comm 'n v.

Charter Med-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984) (quoting Miller v. RR Comm 'n, 363

S.W.2d 244, 245-46 (Tex. 1962)). 31

Finder v. Texas Med. Bd., No. 03-10-00004-CV, 2010 WL 4670510, at *6 (Tex. App.-Austin 2010,

pet. denied) (mem. op.) (citing Goeke, 797 S.W.2d at 15; State Banking Bd v. Allied Bank Marble Falls, 748 S.W.2d 447, 448-49 (Tex. 1988); Smith Motor Sales, 809 S.W.2d at 271-72) (emphasis added).

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III. CONCLUSION

For the reasons discussed herein, the Complainants' Motion for Rehearing should be denied. Fundamentally, Calpine and NRG have not met their burden to prove that the Commission's Order violated any of the Complainants' substantive rights by excluding certain testimony and concluding that ERCOT did not violate any law that the Commission has jurisdiction to administer, any order or rule of the Commission, or any Protocol, procedure, Planning Guide, or other applicable planning requirement. ERCOT's study process satisfied all applicable planning requirements and was transparent and consistent with historical practices. All findings of fact in the Commission's Order were properly based on the record evidence. The Commission should deny Calpine and NRG's Motion for Rehearing.

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Respectfully submitted,

Jason M. Ryan

Vice President and Associate General Counsel State Bar No. 24033150

Email: jason.ryan@centerpointenergy.com Stephanie Bundage Juvane

Senior Counsel

State Bar No. 24054351 Email:

stephanie.bundage@centeEpointenergy.com CENTERPOINT ENERGY SERVICE COMPANY, LLC P.O. Box 61867 Houston, Texas 77208 (713) 207-7261 (713) 574-2661 (facsimile) James W. Checkley, Jr. State Bar No. 04170500

Email: jcheckleykcrosstexas.com

CROSS TEXAS TRANSMISSION, LLC 1122 South Capital of Texas Hwy

Cityview Center, Suite 100 Austin, Texas 78746-005 (512) 473-2700

(512) 276-6130 (facsimile)

Andrea Moore Stover State Bar No. 24046924 Email: astoverggdhm.com Thomas B. Hudson, Jr. State Bar No. 10168500 Email: thudsonggdhm.com Lauren D. Damen

State Bar No. 24078394 Email: ldamenAgdhm.com

GRAVES DOUGHERTY HEARON AND MOODY, PC

401 Congress Avenue, Suite 2200 Austin, Texas 78701

(512) 480-5727

(512) 536-9927 (facsimile)

ATTORNEYS FOR CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC

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Shannon K. McClendon

State Bar No. 13412500

Email: shannonkcr^webmclaw.com 1302 Overland Stage Road, Suite 200 Dripping Springs, Texas 78620 (512) 264-3656

(512) 852-4633 (facsimile)

ATTORNEYS FOR CROSS TEXAS TRANSMISSION, LLC

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Brad Neighbor

State Bar No. 14869300 City Attorney

Michael J. Betz

State Bar No. 00783655 Deputy City Attorney CITY OF GARLAND

200 North 5th Street, Suite 416 Garland, Texas 75040

(972) 205-2380

(972) 205-2389 (facsimile)

Lambeth Townsend State Bar No. 20167500

Email: ltownsend@l glawfirm. com Georgia N. Crump

State Bar No. 05185500

Email: crumpglglawfirm.com

LLOYD GOSSELINK ROCHELLE & TOWNSEND, P.C.

816 Congress Avenue, Suite 1900 Austin, Texas 78701

(512) 322-5830

(512) 472-0532 (facscimile)

ATTORNEYS FOR THE CITY OF GARLAND

r

Kirk D.

mussen

State Bar No. 24013374 Emily R. Jolly

State Bar No. 24057022 ENOCH KEVER PLLC

600 Congress Avenue, Suite 2800 Austin, Texas 78701

(512) 615-1203

(512) 615-1198 (facsimile).

ATTORNEYS FOR LUMINANT ENERGY COMPANY LLC AND LUMINANT

GENERATION COMPANY LLC

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Phi lip Oldham

State Bar No. 00794392 Katherine Coleman State Bar No. 24059596 Jill R. Carvalho

State Bar No. 24087266

THOMPSON & KNIGHT LLP 98 San Jacinto Blvd., Suite 1900 Austin, Texas 78701

(512) 469.6100

(512) 469.6180 (facsimile)

ATTORNEYS FOR TEXAS INDUSTRIAL ENERGY CONSUMERS

CERTIFICATE OF SERVICE

I, Jill R. Carvalho, Attorney for TIEC, hereby certify that a copy of this document was served on all parties of record in this proceeding on this 15ffi day of January, 2015 by electronic mail, facsimile and/or First Class, U.S. Mail, Postage Prepaid.

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